Comment by bcjdjsndon
4 days ago
> Real estate is generally a "good" investment as it's considered a relatively safe way to get significant leverage
Leverage? People don't normally invest in property (normally involves taking out a loan) for the purpose of taking out another loan. That so called "leverage" is being used to buy the house...ie you don't have any leverage
The leverage is the loan taken for the mortgage. If you have a $1M property, $900k loan. If the property's value increases by 5%, that's $1.05M, so you've made 50% returns on your $100k capital invested. That's leverage, the leveraging of $100k to get the returns of $1M asset.
> That's leverage, the leveraging of $100k to get the returns of $1M asset.
Obviously. But that's not leveraging real estate, that's just leveraging cash.
Leveraging real estate would be using the property as collateral for a loan larger than the property itself